Credit card debt balloons
The state and we the ‘consumers’ are both keeping the economy afloat by going further into debt. It’s suicidal.
Flashback: US credit shrinks at Great Depression rate prompting fears of double-dip recession | Canada’s $1-trillion debt baby | Credit delinquencies up 24% in June | Bank of Canada declares recession over | Budget officer ‘can’t tell’ if stimulus plan working | More Canadians in arrears on credit payments | Canadian households $1.3-trillion in debt | Credit card changes benefit families, Flaherty says | Credit companies seek to avoid regulation, create global debit system | Canadian credit card delinquencies rising | All maxed out? Budget measures would improve credit access | Now the consumer crunch: falling credit limits, rising interest rates | Bank of Canada adds $8B to credit markets | $25B credit backstop for banks ‘not a bailout’: Harper
Tavia Grant, The Globe and Mail
September 24, 2009
Canadians continued to pile up credit card debt in the second quarter of this year in lockstep with rising joblessness and personal bankruptcies.
The country’s charge-off rate — a measure of credit default — hit a record 4.8 per cent in the quarter, said Moody’s Investors Service in its latest credit card indices report for Canada. It expects charge-offs will worsen further in the coming months, though the rate of deterioration should ease.
At 4.8 per cent in the quarter, the Canadian charge-off rate index is up almost 60 per cent from a year earlier. It’s the tenth straight quarter of year-over-year increases for the index.
“The intensity of the current recession has led to charge-offs that have exceeded previous cyclical highs by a relatively wide margin,” says Moody’s senior analyst Sumant Inamdar.
Debt levels are nowhere near those of the United States or Britain though. Canadians’ delinquency rate, which tracks account balances where payment is more than 30 days overdue, was 2.82 per cent in the second quarter, up from 2.29 per cent a year earlier but better than the 2.90 per cent in the first quarter.
By contrast, U.S. and U.K. delinquency rates are more than twice as high as those in Canada, the report said.
Credit card charge-offs are closely correlated with the unemployment rate, which hit 8.7 per cent in August. [Ed. Note: And it's higher than that, since (laughably) one has to be on unemployment to be considered unemployed. EI ran out? You're no longer even a statistic.]
The rating agency expects the jobless rate to peak at about 9.6 per cent in the second quarter of next year — which is also when charge-offs should peak.
Charge-offs are defined as lenders’ losses from outstanding balances they’ve had to write off.
Canada’s big banks also see a recovery in the credit-card market next year. Losses in the credit card industry should start to ease in the coming months and growth will return next year as the economy improves, the chief executive of Canadian Imperial Bank of Commerce said earlier this week.
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